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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > How to deduct passive rental property losses from SE tax.
Expert: Helen P. O`Planick, EA
Date: 8/26/2008
Subject: How to deduct passive rental property losses from SE tax.
Question
"Hello Helen —?
I qualify as a real estate professional except for the 751 hr. minimum and I
probably qualify on that as well for '07. If I qualify, where and how do I
deduct my rental property losses to avoid the SE tax on my active real estate
income (from part time remodeling contracts)? In filling out sch.C, can I just
refer to the sch. E rental property income/loss statement? If I don't have the
total hrs. to qualify, can I apply the $25,000 PAL exemption (I'm well under
the $100,000 limit) against my Sch. C bottom line to reduce SE taxes? Or can
I only take it off my AGI??
Thank you for your quick reply. A son's student financial aid app. is hung up
on my '07 return not beinging filed yet.
Answer
You don't reduce your SE income by rental properties. They are totally separate.
Your rental losses, if you are considered an RE pro, are allowed no matter what your AGI is. So it can offset the Sch C income, but the C and E do NOT combine at all to reduce SE tax.
Helen, EA in PA
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